Summertime Silicon Valley Is Party Town for Chinese Investors
Silicon Valley investing has become an international sport — it seems the whole world is throwing itself into the Lyft-versus-Uber fray and jockeying to incubate 22-year-old Stanford grads. And with new investors come new parties.
Usually, the annual HYSTA (Hua Yuan Science and Technology Association, the largest professional group for Chinese in Silicon Valley) dinners are small affairs held in the fall, when investors are in the Bay Area for work. But as the flood of Chinese investment in the Valley has grown, the community here has gotten large enough to need its own summer fête.
“Silicon Valley in the summer is a party town for China-U.S. frequent flyers,” HYSTA organizer Maggie Xiao wrote me. “Our first Summer Summit is the result of such a trend.”
And there has been quite a bit of frequent flying. Alibaba, China’s largest e-commerce company, has invested $120 million into game publisher Kabam, $280 million into messaging service Tango, $250 million into ride-sharing company Lyft and $202 million into same-day delivery startup Shoprunner in the last year — and it is reportedly seeking to invest in disappearing-message service Snapchat, in which Tencent already has a stake. State-owned Zhongguancun Development Group is setting up an incubator in Silicon Valley. Danhua Capital, a Chinese-backed venture fund based in Palo Alto, just closed a $91.3 million round. Julia Zhen of Zenni Optical recently bought the office of the Marin Independent Journal newspaper for her e-commerce business. And investment firms like Deloitte are sending their partners overseas to help encourage more of it.
They all turned out for a wine tasting last Friday night.
Outside Stanford’s Cantor Arts Center, in a private courtyard next to the Rodin sculptures, master sommelier Randall Bertao led the evening. He began with a lesson: Wine doesn’t travel as well as people.
“Many of you have maybe had a bad experience with cabernet before,” he said. “It’s because cabernet doesn’t like to be shaken too much, and that can happen in travel, so now you may be surprised you like it here.”
Hugo Ou, 22, had just finished his last day as a summer analyst at Andreessen Horowitz and was thinking that, actually, some things matured better back in China.
“There are rumors Facebook messenger will integrate with Uber,” Ou said. “WeChat’s the largest messaging platform in China, and you can already call taxis and book flights within it.”
“Before, people always thought Chinese companies were clones, and in some cases it was true. In a lot of ways, now you see the opposite,” he said. “At this point, what will be interesting will be if a successful U.S. company can really be successful in China. So far, maybe only KFC counts.”
Shoucheng Zhang, professor of physics at Stanford University and an investor, is one of the HYSTA organizers. He said the organization connects talented young entrepreneurs with both investment and new challenges in need of solutions.
“We have tremendous resources here — the students and the professors — a lot of ideas. This platform brings capital and problems to the ideas,” Zhang said. “China has $1.3 trillion in U.S. dollars — where are they going to invest that? Silicon Valley.”
This infusion of investment could reshape the Bay Area startup scene as it brings more cash and a fresh set of international tech problems to tackle. Successful startups have moved across borders for quite a while (Facebook’s growth is now coming from overseas), but China has historically been harder to crack. Chinese Internet users have their own social network, Tencent, and rapidly build popular copycat versions of American sites.
As Chinese investors set up shop in the Valley, they’re hoping to create a new internationally-predisposed entrepreneur who may start a company in Palo Alto, but is thinking, from the get-go, about markets far beyond it.
“Entrepreneurs are looking for this international access,” said Luo Wei of Beijing-based Zhongguancun Development Group, which is setting up an incubator in Silicon Valley, as well as both venture and M&A funds. “As an incubator, we differentiate ourselves easily — we link entrepreneurs to the Chinese market, which is quite large.”
Each table had a cheese platter and a row of four Napa wines (people tried to guess which would be the most expensive). Servers carried steak skewers and lamb chops. Bertao walked through the wines — a 2011 Chateau Montelena cabernet sauvignon, a 2010 Blackbird Arise — but no one finished their whole tasting. Guests were discussing new funds. Quite a few had iPhones with cases bearing the Stanford logo.
Handing out colorful eyeglass wipes was Julia Zhen, the SVP of Zenni Optical, who talked about moving her company’s base to a six-acre plot in Marin, while keeping a factory of 800 employees in Danyang.
And of course there were people there to help guide these moves.
“The Chinese money — you can call it dumb money, some of it’s smart, but mostly dumb money — I’m there to help invest it in the U.S.,” said Lili Zheng, who had been working at Deloitte in the Bay Area when the company moved her out to Hong Kong.
At the end of the tasting, Ming Zeng, the chief strategy officer of Alibaba, lingered at his table in the front row.
“We have been quite low-key for a long time, but there’s a need now to be more active. The tech flow between China and the U.S. is growing. The ultimate goal is not just to invest here, but to build something here,” he said. “We’re a global company. Money’s been global for many years. Now ideas and people are global. An entrepreneur here can be thinking of solutions for people anywhere.”